Audit: FORA needs to better define allowable expenses

The Fort Ord Reuse Authority has been using developer fees intended to cover environmental mitigations for everything from coffee cups to office Christmas parties, a forensic audit revealed.

The long-awaited audit report says FORA should stop paying for its executive officer's home DSL and better define its policies regarding allowable expenses.

It questions everything from local business lunches to the $12,000 the agency spends annually on food for meetings to the $255 it spends monthly for the office's coffee and water.

The auditors were not asked to examine how FORA's controller divvies the agency's expenses among its numerous funds.

A review of credit card transactions listed in the audit shows developer fees since 2007 have paid for coffee and paper cups, car washes and repairs, numerous holiday and retirement parties, computer software and a domain name registration and, ironically, a 2010 issue of the Generally Accepted Accounting Principles.

FORA Controller Ivana Bednarik was not in the office Tuesday. Questions were referred to Assistant Executive Officer Steve Endsley, who said expenditures of developer fees were limited to environmental mitigations required by the Fort Ord Base Reuse Plan. He said he could not answer specific accounting questions.

The $34,000 audit was requested by the FORA board of directors after lawyers for Keep Fort Ord Wild filed suit questioning a number of FORA's expenses, including reimbursement to Executive Officer Michael Houlemard for a traffic violation, his home DSL service and dozens of meals at local restaurants justified as business meetings.

The purpose was not to determine whether individual expenses met generally accepted accounting principles, commonly called GAAP, but to determine if they violated FORA policy and make recommendations for clarifying policy.

RGL Forensics examined the agency's expenses dating back five years and found only three violations, all by Houlemard, including the reimbursement for the traffic ticket, which he has since paid back. The violations, which also included a stay at a local hotel and, inadvertently, a meal expense for his wife, accounted for only $378, less than 1 percent of FORA's employee expense reimbursements since 2007.

However the firm faulted the agency's written policies for not directly defining what is and is not a reimbursable expense, going so far as to suggest it might want to ask employees for donations to cover the cost of coffee.

While neither policy nor Houlemard's contract addresses the expense, RGL also recommended FORA stop paying for Houlemard's home DSL service, for which he has been paid about $1,500 since 2007.

Houlemard voluntarily reimbursed FORA the $296 cost of his ticket and traffic school, plus 7.2 percent interest of $44. FORA's outside public relations officer, Candy Ingram, said it was "premature" to say whether he would reimburse FORA the cost of his DSL.

Ingram said the FORA board received the audit report Monday and would be discussing its contents and recommendations at its Dec. 14 meeting. The full audit is posted below.

Among the recommendations, RGL proposed FORA:

· Specifically define what falls within acceptable "travel" expenses.

· Require pre-approval of local business meetings during mealtime, as well as documentation of how the meeting benefits FORA and why it could not take place during normal business hours.

· Restrict travel expenses to IRS per diem limits. The audit found Houlemard was reimbursed $2,150 for local meals since 2007, an average of 10 meals per month and $43 per meal. The IRS limit is $18 for lunch, $36 for dinner.

· Reduce the executive officer's non-construction purchasing authority from $25,000 to a more-typical $1,000, and prohibit him from approving his own purchase requests.

· Establish policy regarding employee involvement with other agencies. Houlemard, it noted, has traveled in his former role as president of the Association of Defense Communities with inconsistent reimbursement by the association. If such work is allowed, RGL suggested, there should be a written policy on travel reimbursement.

The firm also suggested the FORA board review Houlemard's compensation package, writing a new one each time it is adjusted. Merely amending a contract from 2000 makes it difficult to determine his full package, which is currently $223,000 in wages and benefits.

RGL also questioned the structure of $10,000 in "additional benefits" Houlemard receives that he can use for supplemental life insurance, retirement or "other benefits."

Since 2001, the executive officer has opted for all of the money to go into a retirement plan. Because FORA makes the contribution directly to the plan manager, it is not taxed. FORA also contributes tax-to PERS on his behalf.

"Although the total contributions are made to two separate retirement accounts, the purpose and nature of the allowance is duplicative," the report states.

It suggests the supplemental benefits be rolled into his salary to allow for better transparency.

Del Rey Oaks Mayor Jerry Edelen, who will be FORA board president next year, said he takes the audit's findings very seriously and is looking forward to addressing its recommendations with the full board.

Edelen said he wants to go even further than RGL's suggestions and bar reimbursement for local meals altogether.

Michael Stamp, attorney for Keep Fort Ord Wild, said the report vindicates his client, "a group of community activists and bike riders ... that was completely accurate all the way down to (Houlemard's) $10,000 a year extra payment."

"To me (the report shows) 18 years of mismanagement. They have (Houlemard) approving his own claims," Stamp said. "When you have that concentration of power, you're bound to have abuses."